Electricity minister Kgosientsho Ramokgopa earlier this week warned South Africans that despite an almost month-long reprieve from load-shedding, the dreaded rotational power cuts were likely to make a return in the coming months as the generation system continues to be unreliable.
However, the decrease in load-shedding during the first quarter of 2024, compared with the same period last year, has been sufficient for the SA Reserve Bank to revise its outlook in terms of the effects these power cuts will have on the country’s economic growth this year and in 2025.
The Bank expects the load-shedding constraint on GDP growth to soften somewhat.
In its April monetary policy review, the Bank said the intensity of load-shedding subsided in the final quarter of 2023 and remained muted through the first quarter of this year.
“Electricity supply is expected to gradually improve as alternative energy sources expand and are added to the grid.”
The Bank expects load-shedding to shave 0.6 percentage point from growth in 2024, and 0.2 and 0.04 percentage points in 2025 and 2026, respectively — lower than the 0.8 and 0.4 percentage points for 2024 and 2025 projected in the October 2023 monetary policy review.
Head of economic research at the Bank Chris Loewald said during a presentation on Tuesday that while load-shedding had been better than in 2023, it was still considerably higher than in previous years.
The Bank’s monetary policy committee has previously indicated that it expects about 150 days of load-shedding in 2024 and 100 days in 2025.
“The grid remains fragile, as demonstrated by the ramp-up in load-shedding around the middle of February this year,” the Bank said.
Unreliable power supply thus remains a major risk to growth and inflation expectations.
The Bank expects the economy to expand 1.2% this year, compared with 0.6% in 2023 and rising to 1.6% by 2026.
“This outcome amounts to very poor output growth when measured against a growing population and labour force, with SA’s output trajectory diverging markedly from that of its emerging-market peers.”
A slowdown in investment spending on renewable energy was likely to contribute to muted GDP growth in 2024.
Loewald’s presentation showed installed rooftop solar capacity nearly doubled last year to more than 5,500MW and the cumulative generation capacity registered with the regulator rose from less than 1GW in 2022 to almost 7GW by end-2023.
The momentum of renewable energy investment slowed significantly towards the end of the second half of 2023.
“Investment in renewable energy production appeared to collapse, likely indicating front-loading of spending given intense load-shedding in the first half of 2023 along with possible market saturation, and government as well as public sector corporation investment contracted,” the Bank said.
In its latest view for the economy, the Bureau for Economic Research (BER) also flagged a possible downturn in renewable energy investment as one of the factors that could lead to slower GDP growth this year.
Its latest forecast was for growth to accelerate to 1.3% in 2024 and 1.6% in 2025. This was lower than its January forecast of 1.5% and 2.1%, respectively.
“The reason for the downward revision is generally our expectation of lower domestic demand. More important, however, is that we are less optimistic about energy and non-energy fixed investment,” said BER chief economist Lisette IJssel de Schepper and senior economist Shannon Bold.
“This is largely due to lower private sector investment, as the green energy drive — while still the main driver of investment — is losing some steam, and non-energy investment remains lacklustre.”
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